Often, Once An Insurance Company Has Denied Coverage To An Insured And Stated Its Defenses, The Company Has Waived Or Is Estopped From Raising New Defenses
Read the full article at https://lnkd.in/g7H-Scmy and at https://zalma.com/blog plus more than 4200 posts.
After an accident involving plaintiff and non-party Michael Ragland who struck plaintiff while he was traveling through a crosswalk on an electric scooter. Plaintiff became stuck under Ragland’s vehicle, and he had to be transported by ambulance to the hospital for a number of injuries. In Christopher Carter v. Owners Insurance Company, doing business as Auto-Owners Insurance Company, No. 356556, Court of Appeals of Michigan (May 12, 2022) Carter sought no-fault benefits because of the reason used by the insurer was not effective.
BACKGROUND
Plaintiff’s father, who lives in Ohio, had an insurance policy with defendant that was sold by an Ohio-based broker. Following the accident, plaintiff notified defendant of his injuries arising from the accident.
Defendant sent plaintiff a letter stating that it was not responsible for personal injury protection (PIP) benefits to plaintiff because “[plaintiff] is not a named insured on” his father’s policy “nor is he a . . . domiciled relative of our named insured,” i.e. plaintiffs father. The letter informed plaintiff that he could still be eligible for PIP benefits from Ragland’s insurer, Farm Bureau Insurance Company, and defendant instructed plaintiff to inform it if Farm Bureau rejected his claim for benefits.
According to defendant, because plaintiffs injuries did not arise out of his use of a motor vehicle as a motor vehicle, it was not responsible for the payment of his PIP benefits. In making this argument, defendant conceded that, contrary to statements in its initial denial letter, plaintiff was a domiciled relative under his father’s policy, but argued that it was still not responsible for payment of plaintiff s PIP benefits-Farm Bureau was.
At a hearing on defendant’s motion, the trial court agreed with plaintiff and denied defendant’s motion for summary disposition. The trial court also denied the motion because plaintiff detrimentally relied on defendant’s assertion that plaintiff was not a domiciled relative of the named insured.
ORDER OF PRIORITY
Defendant first argues the trial court’s ruling with respect to MCL 500.3163(1) was error. Michigan’s no-fault act articulates the priority of insurers responsible for an injured party’s PIP benefits. The parties agree that plaintiff was domiciled with his father in Ohio at the time of the accident, that his father had an Ohio-based policy with defendant, and that plaintiff was a covered party under that policy. In other words, the parties agree that plaintiff was a nonresident insured by an out-of-state insurer, defendant.
Because plaintiffs injuries did not arise from his “ownership, operation, maintenance, or use of a motor vehicle as a motor vehicle,” defendant was not obliged under MCL 500.3163(1) to cover plaintiffs PIP expenses, and the trial court erred when it concluded differently.
ESTOPPEL
Defendant alternatively contended that the trial court improperly applied the “mend-the-hold” doctrine to hold defendant liable for plaintiffs claim. The Michigan Supreme Court explained the mend-the-hold doctrine as follows:
Where a party gives a reason for his conduct and decision touching any thing involved in a controversy, he cannot, after litigation has begun, change his ground, and put his conduct upon another and a different consideration. He is not permitted thus to mend his hold. He is estopped from doing it by a settled principle of law. [CE Tackels, Inc v Fantin, 341 Mich. 119, 124; 67 N.W.2d 71 (1954) (quotation marks and citation omitted).]
The mend-the-hold doctrine has also been applied in the insurance context:
This court has many times held, and it must be accepted as the settled law of this state, that, when a loss under an insurance policy has occurred and payment refused for reasons stated, good faith requires that the company shall fully apprise the insured of all the defenses it intends to rely upon, and its failure to do so is, in legal effect, a waiver, and estops it from maintaining any defenses to an action on the policy other than those of which it has thus given notice. [Smith v Grange Mut Fire Ins Co of Mich, 234 Mich. 119, 122-123; 208 N.W. 145 (1926).]
Stated differently, “once an insurance company has denied coverage to an insured and stated its defenses, the company has waived or is estopped from raising new defenses.” South Macomb Disposal Auth v American Ins Co, 225 Mich.App. 635, 695; 572 N.W.2d 686 (1997).
Waiver and estoppel are not available where their application would result in broadening the coverage of a policy, such that it would cover a loss it never covered by its terms and create a liability contrary to the express provisions of the contract the parties did make.
The second class of cases allowing the limits of a policy to be expanded by estoppel or waiver involves instances where the inequity of forcing the insurer to pay on a risk for which it never collected premiums is outweighed by the inequity suffered by the insured because of the insurance company’s actions.
In this case, plaintiff’s requested PIP benefits would not be available under the defendant’s out-of-state policy that insures plaintiff, and the requirements of MCL 500.3163(1)-the statute that provides when an out-of-state insured can be required to pay Michigan no-fault benefits to a nonresident insured-were not met. Plaintiff is asking for defendant to be estopped from asserting a basis for nonliability other than the reason given in its initial denial letter.
This would, in effect, broaden the coverage of defendant’s policy, such that it would cover a loss it never covered by its terms and create a liability contrary to the express provisions of the contract the parties did make.
The decision to not name Farm Bureau as a defendant was plaintiff’s alone, and no act or omission by defendant induced it. Based on the above, the court concluded that this case does not present an instance in which estoppel can be used to bring within coverage risks not covered by the policy terms because defendant’s belated argument related to MCL 500.3163 did not prejudice plaintiff.
Plaintiff was prejudiced but not by defendant’s belated argument under MCL 500.3163 but by his decision to not name Farm Bureau as a defendant despite being informed by defendant that Farm Bureau was the insurer liable for his claim.
Therefore, the trial court erred as a matter of law in employing principles of waiver and estoppel to expand defendant’s insurance coverage under the policy at issue.
The trial court was ordered to enter summary disposition in favor of defendant.
ZALMA OPINION
Insurance is a contract. It should always be enforced as written. In this case the insurer mistakenly rejected the claim for a reason not available but learned, later, a reason that was appropriate. Because the injured party sued the wrong defendant and tried to change a policy by claiming waiver, he lost both.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected].
Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe.
Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.
Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com.
Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/
Notice of Claim Later than 60 Days After Expiration is Too Late
Post 5089
Injury at Massage Causes Suit Against Therapist
Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.
Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.
In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.
FACTUAL BACKGROUND
Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma
Post 5087
See the full video at and at
Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf
Zalma’s Insurance Fraud Letter – June 1, 2025
See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...
No Coverage if Home Vacant for More Than 60 Days
Failure to Respond To Counterclaim is an Admission of All Allegations
Post 5085
See the full video at https://lnkd.in/gbWPjHub and at https://lnkd.in/gZ9ztA-P, and at https://zalma.com/blog plus more than 5050 posts.
In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.
BACKGROUND
On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.
Plaintiff filed suit ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.
This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...